San Diego, CA. Practically everyone loves to spend money, but getting something of lasting value is another matter," says the nonprofit Institute of Consumer Financial Education (ICFE), a San Diego based group. "Spending money is more exciting, however, when it is carefully planned in advance because it enables consumers increase value. Spending without planning usually results in wasted money," the ICFE points out in its personal finance classes and literature.

Millions of Americans, young and old, routinely take on expensive, short term credit card debt in order to purchase goods and services they otherwise normally cannot afford. Most American consumers are wasting 20 to 30 percent of their money just because of poor spending habits, such as not taking the time to comparison shop.

Consider the extent to which some merchants and credit card issuers will go in order to entice people to spend beyond their incomes: no fee and low fee credit cards, instant credit approvals, first time buyer programs, sweepstakes and contests where chances of winning are increased with each credit-based purchase, extended manufacturers warranty programs, replacement insurance and cash-back with purchases.

Some companies encourage consumers to buy money orders and hold on to them for emergencies while some bankers encourage consumers with poor or no credit worthiness to deposit money ($500 - $2500) into their bank in order to secure a credit card with a 21.99 percent interest rate. In essence, people are borrowing their own money back at an interest rate of $21.99 per $100 per year.

It is not just credit-based spending decisions that get people into trouble. Some people who have either exhausted credit or ruined their credit rating, have no trouble overspending at all. Cash slips through their fingers so fast, that at the end of the day, if they started out with $50, they often have less than $5 remaining. Many people will also have great difficulty determining, at then end of the day, just where it was all spent. Remember, an overspender is not just an individual who spends more than they earn, an overspender is also an individual who pays too much for things.

Here is how to develop improved spending practices:

1. Write down your detrimental spending practices you want to change.
2. Write down how you plan to bring about the changes in each area.
3. Construct a cash-flow sheet showing income and outgo.
4. Set up and implement a spending-plan.
5. Discontinue all use of credit cards.
6. Begin collecting and making notes on your cash purchase receipts .
7. Review all insurance coverage for duplication, higher deductibles, etc.
8. Begin saving one dollar-a-day (or dollars) and all pocket change, everyday.
9. Look for alternatives and substitutes to spending.
10. Start utilizing cents-off coupons and mail in for rebates.
11. Wait for the sales. Comparison shopping can save more than 50 percent.
12. Take advantage of seconds, rebuilt and used items where practical.
13. Start doing things for yourself that others were paid to do previously.
14. Have weekly meetings on improving spending with other family members.
15. Separate shopping trips (when comparing prices, value, reparability, etc.) from spending trips (when actually making the purchase). Avoid carrying credit cards, much cash or a checkbook on the shopping trips.

For many individuals, debt is a roadblock to saving money. One easy way to get into the savings habit and still pay off debt is to begin saving a dollar-a-day and all pocket change. Be sure to do this even on the weekends. It will average about $50 a month. At the end of each month, take the money saved and pay down on a debt. Two positive things have been accomplished, getting to the savings habit and paying off some debt.

If things have gone too far and you have become delinquent on some accounts, creditors are eager to work with people who admit they are in
trouble. Creditors do express their greatest concern, however, over
consumers whose accounts are delinquent and who don't stay in touch. It is easier to gain extensions by approaching the creditor first, before the late payments hit, and it demonstrates concern over one's obligations.

The moment you become aware income will be reduced, begin to develop a plan to contact those creditors who will be affected. First contact should be by phone, since most have 800 numbers, followed by a letter confirming your phone conversation. As you continue to convey to creditors from time to time that you are succeeding in your plan to reduce outgo and increase income to cover all obligations, most will give you the time needed to meet the obligation, while at the same time encouraging you to meet it in the very shortest time possible.

Do not make payment commitments you cannot honor. Do not tell a collector “what they want to hear”, just to get them off the phone. It only makes things worse. Be honest, be humble, be in touch. Remember also, in addition to getting your financial situation in balance, another goal is to keep credit records free from hurtful bruises as a result of any temporary indebtedness. Collection agencies also report to credit reporting agencies once an account has been turned over to them. Your cooperation with them will make a difference in what, if anything they report to credit reporting firms.

Steps to take to reduce indebtedness

1. Begin immediately. (Getting started can be the most difficult.)
2. Make up a written plan of action.
3. Determine what amount you can/must contribute monthly to debt repayment.
4. Take on no new debt including a consolidation loan.*
5. Close credit card accounts by returning charge cards to issuers.
6. Maintain written accounting of all income and outgo, especially cash.
7. Begin collecting receipts to raise awareness.
8. Closely examine all expenses looking for ways to increase value.
9. Put all extra income towards paying off debts.
10. Start doing things yourself and do not pay for services.
11. Make all necessary sacrifices to eliminate debt.
12. Sell items that are losing value especially those with debt owing
13. Make getting out of debt a family affair.
14. Contact creditors to keep them informed and ask for temporary reductions in payments.
15. Utilize cents-off coupons wherever possible. Send in for rebates.
16. Critically review spending practices and habits.
17. Make comparison shopping a habit.
18. Once a debt is paid off, DO NOT reduce amount of #3 above, pay off other debts faster.

* A consolidation loan may be workable ONLY if the loan interest is less than the interest on the debts to be retired AND paid-off charge accounts are closed AND the extra cash-flow is put towards paying off the consolidation loan even faster. Otherwise in a year or two many people who only pay off and not close accounts are often paying off a consolidation loan and also new credit purchases.

The ICFE’s course in personal finance is known as "The Money Instruction Book has 14 chapters with quizzes. The course is available in classroom and home study versions is $29.95 plus $4 postage. The Instructor's Guide is $34.95 plus $4 postage. Send to: ICFE U.S. PO Box
34070, San Diego, CA 92163-4070.

Free information:

Send a stamped, self-addressed envelope to

ICFE Home Study Course
PO Box 34070
San Diego, CA 92163-4070.

Or order online at www.icfe.info.

Contact Paul Richard 619-239-1401 or info@icfe.info